Google throws down the gauntlet by shipping the Nexus 7 with the latest version of Android, Android 4.1 Jellybean. While Google has an advantage from being the latter device and providing better hardware such as a 1280x800 display versus the Kindle Fire's 1024x600 screen, the real battle is not for hardware dominance but for the Android marketplace. Apple has already shown how lucrative the tablet-commerce space can be. The battle here between Google and Amazon is for customers who will spend money on apps and products in the respective marketplace. Or to put it bluntly, this is for who gets a cut for the business that's being done on the android tablet. Google sells apps through the Google Play store while Amazon sell Android apps through Amazon.com. Throughout the presentation for the Nexus 7, Google emphasized an optimized and improved experience for Google Play content on the Nexus 7 as well updated features such as improved app updates that update only the parts of the app that have changed. While these may be Jellybean specific and will probably appear on all Android 4.1 devices eventually, for now the Nexus 7 is the only one that has it.
Google is also taking aim at Amazon's core business by starting to offer magazines and books through Google Play. They showed off the smoothness of the new e-book reader and were forward with their intentions of selling movies and books through the Google Play store. This is Amazon territory and emphasizes on the concept of the tablet as being a consumption device. The old idea of being able to see something on TV, like Indiana Jone's fedora and being able to purchase a fedora on-line immediately is now a reality. It still takes a few clicks and searches but it won't be long before you could pause the video, touch on an object, have Google guess what it is and offer you to buy it or show places where it could be bought.
Another huge advantage the Nexus 7 will have is reach. While not all features will be available internationally, the Nexus 7 will be available to purchase every where soon. Amazon can't do this because of the Kindle Fire's close ties to Amazon.com. Even in countries where Amazon does business, it does not make the Kindle Fire available because of the deals that would need to be in place for the consumer to fully appreciate the Kindle Fire. Since Amazon is counting on the sale of items through the Kindle Fire, this is a huge deal. It might not as well sell the Kindle Fire where it won't be be able to earn revenue through later purchases.
It does not mean that this is a total loss for Amazon. There is nothing to stop Google Nexus 7 users to download the Kindle app and buy books on Amazon. Google will not block Nexus 7 users from going to Amazon.com and buying music from there. But what Google Play will offer is a more seamless experience for the Nexus 7 that is customized to the offering possible within the region. This cost in expanding where the Kindle Fire will be sold will make Amazon pause and asses whether it is worth expanding the Fire's market.
Will Amazon get into the more messy, multi-cultural, legal morass that is the international market, doing it's business across borders or will it release an Amazon-less Kindle Fire, where it will be sold as Kindle Fire without the Amazon brand and storefront? I don't think Amazon will sell the Kindle as a device-only purchase outside the US soon because the Kindle is a loss-leader whose main purpose is to draw more customers to the Amazon sites. There are tons of cheap Android tablets which it has to compete with. In the end, it would be a liability to the Amazon brand. Amazon will likely begin selling the Kindle where it does do business and can get the deals it needs because it makes the purchase experience better, especially for electronic / software products like e-books, apps, music and video while being a storefront for it's physical goods products. That leaves the rest of the world for the Google Nexus 7.
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